As global warming intensifies and extreme weather events become more frequent, insurance systems worldwide are under pressure. In the United States, for instance, rising flood and hurricane damages have driven major reforms in the federal flood insurance program (NFIP), reducing public subsidies and raising costs for homeowners.
Published in Humanities and Social Sciences Communications (Nature Portfolio), the study examines how climate change-driven hurricanes could impact profitability in the U.S. homeowners' insurance market - and proposes a new approach: transforming anticipated financial losses into climate-mitigation investments.
The research was conducted by a joint team from Tel Aviv University, Max Stern Yezreel Valley College, and the University of Haifa, including PhD student Moran Nabriski and Prof. Colin Price from TAU's Porter School of the Environment and Earth Sciences, and Dr. Ruslana Palatnik from the University of Haifa.
From Risk Management to Climate Leadership
Insurance is a major economic force with a dual role; on the one hand it is a risk manager, and on the other a large institutional investor with long-duration capital. Given its systemic weight - and because insurance is fundamentally a pooling mechanism that links economic sectors - the study calls for the industry to be a proactive partner in addressing climate change. It should not only react to extreme events but also reduce risk at its source (akin to building-safety standards that prevent fire losses).
Insurance plays a dual role in the global economy: it manages risk and serves as a powerful institutional investor. Given its influence and financial reach, the researchers argue that the industry should act not only as a responder to natural disasters, but as a proactive force in reducing climate risks, much like building codes prevent fire losses before they occur.
By combining a market-equilibrium model with climate-driven hurricane damage projections, the study shows that insurers' profitability could decline by 11%-100% across modeled scenarios, leading to higher premiums and reduced coverage. Redirecting that expected loss into emissions-reduction initiatives, the researchers note, could generate climate benefits that far exceed the industry's direct economic share.
"Insurance is commonly viewed as a tool for transferring risk over time and across geographies, yet natural disasters occur in the same places at the same time," said lead author Moran Nabriski. "As natural disasters intensify, the insurance industry should represent the economy not only as a responder to a changing climate, but also as a leader in confronting it. Because insurance connects all sectors of the economy, it can leverage that position into a coordinated effort with a meaningful impact on climate risk."
The study provides a quantitative framework for assessing future risks and demonstrates how insurers' long-term capital can become a powerful engine for financing global climate solutions.
